McDonald's Japan pushed into loss by food safety woes

Thu Feb 5, 2015 6:04am EST
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By Thomas Wilson

TOKYO (Reuters) - The Japanese unit of McDonald's Corp (MCD.N: Quote) booked its first annual operating loss since going public in 2001 and its January sales plunged by a record 39 percent as food safety scandals drove customers away.

The earnings pain, made worse by a shortage of french fries late last year, is likely to continue with analysts saying they do not expect a quick turnaround in a country where consumers are highly attuned to food quality issues.

McDonald's Holdings Co (Japan) (2702.T: Quote), which operates the fast food chain's second-largest restaurant network after the United States, did not give its customary earnings guidance but said it hoped to issue full-year forecasts by end-March.

The unit booked an operating loss of 6.7 billion yen ($57 million) in 2014, compared with an operating profit of 11.5 billion yen a year earlier.

Revenue tumbled 14 percent, the seventh straight year of decline.

The problems are an added distraction for McDonald's Corp, the world's largest restaurant chain by sales, which last month replaced its CEO with Chief Brand Officer Steve Easterbrook following one of its worst financial years in decades.

The Japan unit, 49.9 percent owned by McDonald's Corp, was hit last year after a major Chinese supplier of chicken was found to have been in breach of food safety standards. It was then forced to temporarily ration fries due to labor disputes at U.S. West Coast ports and take the costly step of shipping some by air.

Quality issues arose again last month with the news that customers had found foreign objects, including a tooth, in their food. January figures showed customer numbers down 29 percent from a year earlier.   Continued...

McDonald's Holdings Co (Japan) President and Chief Executive Officer (CEO) Sarah Casanova speaks during a news conference at Tokyo Stock Exchange (TSE) in Tokyo February 5, 2015.  REUTERS/Yuya Shino